Enlisting of Skill Training under CSR in Companies Act, 2013

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June 15, 2016
Members of the Council.

Sub : Corporate Social Responsibility (CSR) – Enlisting of Skill Training under CSR in Companies Act, 2013

Dear Member

With regard to the above subject, please note the following.

Section 135 of Companies Act 2013 contains regulations on Corporate Social Responsibility which came in to effect from April 1, 2014. This Section states the following.

1. Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.

2. The Board of every company shall ensure that the company spends, in every financial year, at least two per cent. of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy:

Schedule VII of the Companies Act specifies the activities which companies can undertake under CSR activity. Skill Training is covered in item no. (ii) of Schedule VII.

The Council has recently received a communication from Ministry of Skill Development and Entrepreneurship, Government of India, clarifying the following.

a) Under Apprentices Act, 1961 read with rules, mandates apprenticeship training to any area or any industry in any area as notified by Central Government from time to time. Companies which are covered under the Apprentices Act shall undertake Skill Training under the Apprentices Act 1961. These companies can also undertake skill training from their CSR funds over and above the requirement under the Apprentices Act. The companies which do not fall under the Apprentices Act can undertake skill training under provisions of Corporate Social Responsibility Act.

b) General Circular dated 18.6.2014 issued by the Ministry of Corporate Affairs (copy enclosed) already clarifies that expenses incurred by companies for fulfillment of any Act/Statue of regulations (such was labour laws, land acquisition act etc.,) would not come under CSR expenditure under Companies Act.

Thanks and regards
R. Ramesh Kumar
Executive Director